The FTSE 250 index is having a good year. Sure, the FTSE 100 has delivered more (9% vs 16% respectively). But considering that our economy is hardly motoring, the UK-focused second tier of the market has certainly held its own.
However, this form pales in comparison to some of its members. Today, I’m looking at one example whose share price has absolutely rocketed and asking whether I’m making an awful mistake by not getting involved.
White hot form
Electrical retailer Currys (LSE: CURY) recent performance has been magnificent. The shares are up over 50% this year so far. Go back 12 months and the gain’s 72%.
I don’t know about you but this is exactly the sort of form that makes me want to pick individual stocks over funds that merely track the index.
This rise can be attributed to a few things. Arguably the most important of these has been evidence of better trading. Despite a tough backdrop, like-for-like sales growth has been seen in both the UK and the Nordics. This has pushed management to raise its profit guidance several times.
The market’s also cheered lower-than-previously forecast financing of its pension scheme and the resumption of dividends. Holders received 1.5p per share in September — the first cash return since January 2023.
Still reasonably priced
There are certainly a few reasons for thinking this might continue. Back in September, the company said it had made a strong start to its new financial year. Sales of laptops with artificial intelligence (AI) functions were particularly strong. If this momentum carries into the vital festive period, the share price could be heading higher.
Despite being in electrifying form in 2025, the stock still doesn’t look expensive either. A price-to-earnings (P/E) ratio of 13 for the current financial year is around the market average.
Are storm clouds gathering?
But things could unravel. For example, Currys is still heavily dependent on the UK for sales. That’s a risk if consumer demand drops. And who knows what impact next month’s Budget might have.
Another thing that concerns me is the apparent lack of competitive advantage. To my mind, Currys just doesn’t do anything special. By this, I mean that it wouldn’t take much for rivals to place pressure on what is already a very low-margin business.
I’m also not seeing much in the way of director buying. The last purchase was back in January, according to my data provider. Since then, there have been some very significant sales from those best placed to know how the company’s performing.
Finally, we need to put recent gains into perspective. Go back a decade and the shares were trading close to 500p a pop. At last Friday’s (24 October) close, the price was 145p. Even those who bought their stakes in Spring 2021 — before inflation charged upwards — are only just back in the black.
So yes, Currys is doing well. But this sustained period of underperformance shouldn’t be overlooked.
My verdict
I congratulate anyone who had the foresight to invest in the company in the last year. Considering all of the above however, I’m still not comfortable putting my own money to work in Currys.
For me, there are many far more tempting options in the FTSE 250.
